Gold Miners ETF (GDX)

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Top Gold Miners Face Metal’s Fading Rally After Bumper Quarter
By: Bloomberg | February 18, 2021

The world’s two biggest gold producers got a lift from elevated precious-metals prices at the end of last year, but with bullion in retreat miners may have to work harder to keep investor interest.

Newmont Corp., the world’s largest gold producer, said this week it’s enriching dividend payouts, while Barrick Gold Corp., the No. 2 supplier, is giving shareholders some proceeds from selling off mines. Both reported better-than-expected earnings on Thursday, helped by lower costs and higher metals prices.

Gold averaged about 26% higher in last year’s fourth quarter than the same period in 2019, boosted by pandemic-induced haven buying, low interest rates and stimulus spending. The rally has sputtered this year on a resilient dollar and optimism of prospects for a global economic recovery. That’s weighing on share prices in the industry, with a Bloomberg Intelligence gauge of senior miners posting its worst January since 2013.

Newmont shares slipped 5.5% this year after surging 38% in 2020. Barrick has fallen 10%, after last year’s 23% jump.

Newmont reported adjusted earnings of $1.06 a share for the fourth quarter, beating the 95-cent average of analysts’ estimates compiled by Bloomberg. The Denver-based company boosted its regular quarterly dividend by 38% to 55 cents per share, reinforcing a framework announced last October to give investors “clarity” on distributions amid elevated gold prices.

“You’re going to continue to see Newmont meet their promises in terms of meeting guidance and having that consistency in terms of returning cash to shareholders,” Chief Executive Officer Tom Palmer said in a phone interview.

Barrick, the most profitable major bullion producer in the past year, delivered a sixth straight earnings beat, with adjusted per-share earnings of 35 cents topping the 31-cent average estimate of analysts. The Toronto-based company said Thursday it plans to give investors a capital distribution of 42 cents a share as part of the $1.5 billion in proceeds from selling assets including its stake in Australia’s Kalgoorlie mine in 2019.

“It’s a deserved return back to shareholders who have had challenging times at Barrick in the past,” CEO Mark Bristow said in a phone interview. “At the same time, we haven’t touched the strength of our balance sheet.”

If gold prices stay above $1,700 an ounce, Barrick will continue building up its cash, according to Bristow, who said he is “wary” while managing the company’s financial position at the “top of the market”.

“You should carry some insurance on your balance sheet,” Bristow said, adding that he’s anticipating more mergers and acquisitions ahead for the industry. “We’ve been very clear that we want to participate in that consolidation, particularly when it comes to high quality assets.”

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